Clyde & Co “failed to reflect on its own failures” in AML case

Clyde & Co: Late admissions

City firm Clyde & Co “failed to reflect on its own role” in anti-money laundering (AML) rule breaches until a late stage and sought instead to blame one of its partners, the Solicitors Disciplinary Tribunal (SDT) has held.

Though some of the blame did lay with Edward Mills-Webb, it said, the law firm did not focus “on its own weaknesses” for a long time.

The comments came in the full ruling explaining last month’s decision to fine Clyde & Co £500,000 and Mr Mills-Webb £11,900.

The SDT expressly allocated the blame when deciding how to split the costs of £183,000, ordering that the law firm should pay 70%.

A statement of agreement facts and admissions before the tribunal outlined how all of the breaches arose between 2014 and 2018 from the firm and Mr Mills-Webb’s work for ‘Company A’, a large shipping business that, as is common in the industry, used multiple companies (called ‘principals’) to buy, own and sell ships, with Company A acting as their agent.

The breaches were caused by a failure to maintain complete and up-to-date due diligence on Company A and its owner, and to recognise that the principals were also clients of the firm and hence customers for the purposes of the AML rules.

These failures at the onboarding stage also meant there was insufficient focus on verifying source of funds when escrow monies were paid into the firm by principals. There were shortcomings in the business acceptance unit, risk team and accounts department, as well as by Mr Mills-Webb.

The SDT found that the firm’s level of culpability was “high”. It went on: “In relation to harm, the tribunal noted that Clyde & Co was regarded as a prestigious firm with a global reputation. The larger firms shoulder a greater responsibility to uphold the reputation of the profession and so the harm caused by professional misconduct is also greater.

“The tribunal further noted that while there was no evidence of money laundering having taken place, the possibility could not be discounted in the circumstances of these breaches.”

The misconduct was aggravated by the fact it was repeated and included missed opportunities to correct earlier errors. “The firm had failed to ‘join the dots’ over a significant period of time,” it said.

The SDT went on: “The firm had initially sought to blame Mr Mills-Webb for the entirety of the failings. Clearly, in light of his own admissions, some of that blame was justified.

“However, Clyde & Co had failed to reflect on its own role until a late stage and had not focused enough attention on its own weaknesses in procedures and policies until recently.

The matter was “significantly aggravated” by the fact that back in 2017, the SDT had fined Clyde & Co £50,000 and three partners £10,000 each for allowing its client account to be used as a banking facility and breaching AML rules.

“Despite that finding, the firm had not, at the material time, put adequate and robust measures in place,” the SDT noted.

In mitigation, it acknowledged that the firm had shown “genuine insight”, which was reflected in the improvements made to matter-opening forms, changes made to the way in which the business acceptance unit and risk team operated, “the intensification of the training programme and the higher priority placed on these issues at management level”.

Clyde had co-operated with the Solicitors Regulation Authority (SRA) and made admissions, “albeit at a late stage in proceedings”.

In setting the fine, it determined that the notional starting point was £50,000, but increased this 10-fold given the firm’s size. Clyde had argued for a fine of no more than £150,000.

Mr Mills-Webb’s mistakes were similarly careless but his misconduct was mitigated by his “genuine and complete insight”, the SDT said.

He has undergone “extensive training” and discussed each new client and matter with the director of risk and compliance at his current firm.

Having set his fine at £14,000, the tribunal reduced it by 15% to reflect the significant delay in the SRA bringing the case against him, which was “not justified and had caused stress, anxiety and potential career-limitation to Mr Mills-Webb”.

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